Compound C90N is a raw material used to make Mosbarger Corporation's major product. The standard cost of compound C90N is $38.20 per ounce and the standard quantity is 8.0 ounces per unit of output. Data concerning the compound for September appear below: The raw material was purchased on account.
-The Materials Price Variance for September would be recorded as a:
A) Credit of $567
B) Credit of $770
C) Debit of $567
D) Debit of $770

Question

Compound C90N is a raw material used to make Mosbarger Corporation's major product. The standard cost of compound C90N is $38.20 per ounce and the standard quantity is 8.0 ounces per unit of output. Data concerning the compound for September appear below:  The raw material was purchased on account.
-The Materials Price Variance for September would be recorded as a:
A) Credit of $567 
B) Credit of $770 
C) Debit of $567 
D) Debit of $770

Quizplus · Accepted Answer

The Materials Price Variance formula is (Actual Price - Standard Price) x Actual Quantity. From the information given, we can calculate the actual price to be $45 per ounce. Thus, the variance is ($45 - $38.20) x 220 ounces = $770. Since the actual price is higher than the standard price, the variance is unfavorable, which means it should be credited to the accounts payable. Therefore, the materials price variance for September would be recorded as a credit of $770.

Compound C90N Is a Raw Material Used to Make Mosbarger